Drug Price Control in India

Recently, Indian government took bold steps to control and curb the drug prices in India. It also included coronary stents under the essential medicines and reduced its prices significantly which caused strains among pharmaceutical companies. We have analyzed this whole phenomenon in Detail.

Feb 20, 2017 16:07 IST
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Drug Prices in IndiaThe right to health is not mentioned in Indian Constitution but health remains a very important aspect of human life. The supreme court of India held in one of its decisions on the scope of article 21 which states “Right to life” covers “the Right to good health”.
In recent years, the government has taken steps to control the prices of drugs and medical tools in India so that the medical benefits could be provided to all at affordable prices.

Here, we have briefed the history of drug price control in India, the recent steps taken by the government for drug price reduction and its impacts on people and industry.

Brief History of Drug Price Control in India

The Drug Price Control Order (DPCO) is issued under Section 3 of Essential Commodities Act, 1955. It is aim is to ensure that essential drugs are available to all at affordable prices.
The first time, the Drug Price Control Order was put in place after the Sino-Indian war of 1962 because pharmaceutical companies started to profiteer and it became necessary in public interest to cap drug prices. Over the years, it has been modified five times.
The Drug Price Control Order (DPCO) 1995 was introduced in India which covered 74 bulk drugs and their formulations. The consequences were not quite as hoped because the producers of many drugs shifted their manufacturing to some other countries. The result was half the products were discontinued after their producers exited. Indian production of something as important as penicillin shifted to China.
In 1997, the government established National Pharmaceutical Pricing Authority (NPPA) which was entrusted with the task of enforcement of provisions of DPCO, fixation/revision of prices of pharma products and monitoring of prices of controlled and decontrolled drugs.

The National Pharmaceutical Pricing Policy-2012 was set up on 07.12.2012. The salient features of NPPP-2012 are the regulation of prices of drugs is on the basis of essentiality of drugs as specified under National List of Essential Medicines, (NLEM)-2011, regulating the prices of formulations only and fixing the ceiling price of formulations through Market-Based Pricing (MBP).

The new policy of DPCO was introduced in 2013. DPCO 2013 increased India’s National List of Essential Medicines (NLEM) from 74 to 799 formulations. Since its introduction, no new investments have been witnessed. There has been a shift towards non-controlled products. As a consequence, new introductions of drugs and the average number of incumbent brands and new introductions of drugs in the DPCO 2013 list has reduced compared to the non-DPCO 2013 list.
 In 2015, the health ministry revised its National List of Essential Medicines (NLEM), 2011 to include 376 drugs in the new NLEM 2015 list. A total of 106 medicines were added, and 70 medicines have been deleted to finalize the new list.

Recent steps taken by the government to control Drug Prices in India
1. Reduction in the prices of medicines

In September 2016, drug price regulator National Pharmaceutical Pricing Authority (NPPA) reduced the prices of around 33 essential medicines, which brought down their retail prices by 30-50%. The medicines include antibiotics and drugs used to treat ulcerative colitis, anti-allergics used for common cold and cough, arthritis, gastro- esophageal reflux disease (Gerd), psoriasis, and tuberculosis.

The purpose of this move is to cut down the prices of commonly used drugs for critical diseases by expanding the span of price regulation to cover new drugs. Earlier (NPPA) issued a notification which said the ceiling prices of 18 more drugs in its 36th meeting held on 14th September 2016. Total drugs under price control now 467 in NLEM, 2015.”

The government currently fixes the prices of essential drugs based on the simple average of all medicines in a particular therapeutic segment, having sales of more than 1 percent. NPPA released another notification which said NPPA has fixed/revised ceiling prices of 55 scheduled formulations of Schedule-I under Drugs (Price Control) Amendment Order,2016 and retail price of 29 formulations under DPCO, 2013 in related Notification /order dated 23.12.2016.

The medicines which are not under price control, manufacturers are allowed to increase their maximum retail price by 10 per cent annually. The calculation for essential drugs is done on the basis of the simple average of all medicines in a particular therapeutic segment with sales of more than 1 percent. Despite getting pressure from domestic generic drug manufacturers, NPPA has been consistently working on lowering and revising prices of NLEM in a phased manner. So far, NPPA has revised prices of 330 out of 799 formulations.

2. Reduction in the prices of coronary stents

In July 2016, the Ministry of Health and Family Welfare entailed coronary stents in the National List of Essential Medicines, 2015 (NLEM, 2015). Afterward, on December 21, 2016, the Department of Pharmaceuticals included coronary stents at number 31 of Schedule I of the Drug Prices Control Order, 2013. This inclusion effectively gave it the status of a “scheduled formulation” as defined in the Drug Price Control Order 2013.
On 13 February 2017, the National Pharmaceutical Pricing Authority (NPPA) issued an order which capped the price of coronary stents up to 40 per cent lower than their existing market prices. It has ended a long-winded saga that started with the inclusion of these devices in the National List of Essential Medicines in July 2016.
The notification has categorized stents into two types. One is bare metal stents (BMS) and second is drug-eluting stents. A stent is a tube-shaped device. It is inserted into a blocked blood vessel, which helps in clearing the blockage, sometimes through physical means but often through the drugs, it gives out at a slow rate.
The price cap for bare metal stents is Rs 7,260. And the price cap for a drug-eluting stent is Rs 29,600. This price cap amounts to 40 percent lower than the existing prices with the range currently at Rs 25,000-Rs 1,50,000. Industry sources say that 35 per cent of the stent products are available at the lower end of the spectrum.
The notification does not give any provision on whether a stent is branded or unbranded, manufactured locally or abroad.  But the notification has made it clear that so long as it is being sold in the country, no stent can cost more than Rs 29,600 though there is room for the addition of VAT, local taxes etc.
The notification clearly states the fact that a stent will have to be put in by a hospital set-up and the product is usually billed by institutions rather than the people selling them.
The notification also says that institutions such as nursing homes, hospitals, and clinics performing cardiac procedures using coronary stents will have to comply with the price ceilings.

Impacts on the Industry
Industry estimates suggest that the total pharmaceutical market in India is worth $50 billion. It is likely to grow many times in the future because of the huge burden of diabetes and hypertension in the Indian population. The core committee that analyzed the pros and cons of bringing coronary stents under price control in its report to the government last year mentioned the high incidence of coronary artery disease (CAD) in India describing it as a “major public health problem”. That is why stents were ruled to be “essential” for public health, a criterion that is key to the price control principle.
The industry has been unhappy with the inclusion of stents under the price cap.  A lot of dire predictions claiming patient’s being deprived of the latest technological advancements have come out from the industry.
But many health activists have welcomed the move. Activists said we strongly support the use of Paragraph 19 of the DPCO to set right the balance in favor of the public interest.

Impacts on People
According to some research medical expenditure takes almost 60 percent of the income of an individual. This tells the sad story of health in India and why the people are people on a scale of health, food, and shelter. And India is relatively a poor country. So the reduction in the prices of life-saving drugs, and medical equipment would always be a welcome step among the people of India.

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